SOURCE SCIENTIFIC, INC.
NOTICE OF ANNUAL
MEETING OF SHAREHOLDERS
TO BE HELD
Wednesday, February 21, 1996
TO THE SHAREHOLDERS OF SOURCE SCIENTIFIC, INC:
You are cordially invited to attend the Annual Meeting of Shareholders
of SOURCE SCIENTIFIC, INC. (the "Company"), which will be held at 7390 Lincoln
Way, Garden Grove, California, on Wednesday, February 21, 1996, to consider and
act upon the following matters:
(1) The election of a Board of five Directors. The persons nomin-
ated by the Board of Directors (John A. Karsten, Robert B. Lyons,
Susan L. Preston, Richard A. Sullivan, and Thomas J. White) are
described in the accompanying Proxy Statement.
(2) Such other business as may properly come before the meeting or
any adjournments thereof.
Only Shareholders of record at the close of business on January 5,
1996, (the "Record Date") will be entitled to vote at the Annual Meeting or any
adjournments thereof.
This Proxy Statement and the accompanying Proxy were mailed to
Shareholders by American Stock Transfer and Trust Company, commencing January
15, 1996. The executive offices of the Company are located at 7390 Lincoln Way,
Garden Grove, California 92641.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON,
PLEASE DATE, SIGN AND RETURN THE ACCOMPANYING PROXY WITHOUT DELAY IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE. YOU ARE CORDIALLY INVITED TO ATTEND AND YOUR
PROXY WILL NOT BE USED IF YOU ARE PRESENT AND PREFER TO VOTE IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
7390 Lincoln Way Catherine Curtis
Garden Grove, California 92641 Secretary January 5, 1996
<PAGE>
SOURCE SCIENTIFIC, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be held on February 21, 1996
This Proxy Statement is furnished in connection with the solicitation
of Proxies by the Board of Directors of SOURCE SCIENTIFIC, INC., a California
corporation (the "Company"), for use at the Annual Meeting of Shareholders of
the Company to be held at 7390 Lincoln Way, Garden Grove, California, at 3:00
p.m., Pacific time. A Proxy for the Annual Meeting is enclosed, by means of
which you may direct your vote as to each of the proposals described in this
Proxy Statement.
All Proxies which are properly completed, signed and returned to the
Company prior to the Annual Meeting, and which have not been revoked, will be
voted. A Shareholder may revoke his or her Proxy at any time before it is
exercised by filing with the Secretary of the Company at its executive office in
Garden Grove, California, a written notice of revocation or a duly executed
Proxy bearing a later date, or by appearing in person at the Annual Meeting and
expressing a desire to vote his or her shares in person.
January 5, 1996, has been fixed as the record date (the "Record Date")
for the determination of Shareholders entitled to notice of and to vote at the
Annual Meeting or any adjournment of the Annual Meeting. As of that date, the
outstanding voting securities of the Company consisted of 15,520,476 shares of
Common Stock (the "Common Stock"), and 1,555.3 shares of Series C Convertible
Preferred Stock (the "Series C Preferred Stock"). Holders of Common Stock are
entitled to one vote for each share of Common Stock upon all matters to be
considered at the Annual Meeting, including the election of Directors, except if
notice is provided at the Annual Meeting as described in the next paragraph, at
which time the holders of Common Stock would have cumulative voting rights;
holders of the Series C Preferred Stock are entitled to vote with the holders of
Common Stock on an "as-converted" basis, and, at the Record Date, each
outstanding share of Series C Preferred Stock was entitled to 1.45 votes. Unless
the context otherwise requires, the term "Shareholder," when used in this Proxy
Statement, refers both to holders of shares of the Common Stock and to holders
of shares of the Series C Preferred Stock.
If any Shareholder gives notice at the Annual Meeting prior to the
voting for election of Directors that he or she intends to cumulate his or her
votes, each Shareholder may cumulate his or her votes and (a) give any candidate
whose name has been placed in nomination prior to the voting a number of votes
equal to the number of Directors to be elected multiplied by the number of his
or her shares or share equivalents, or (b) distribute his or her votes among as
many candidates so nominated as he or she sees fit. The candidates receiving the
highest number of votes, up to the number of Directors to be elected, will be
elected as Directors.
PRINCIPAL SHAREHOLDERS. The following table sets forth certain information with
respect to beneficial ownership of the Company's outstanding Common Stock as of
January 5, 1996, (i) assuming the exercise of all exerciseable outstanding
warrants and options; (ii) assuming the conversion into Common Stock of all
Series C Preferred stock outstanding; and (iii) assuming the conversion into
Common Stock of all debentures, (a) by each person who is known by the Company
to own beneficially more than five percent of the shares of the Company's Common
Stock; (b) by each director or nominee of the Company; (c) by each of the
Company's executive officers named in the Election of Directors section within
this Proxy; (d) by all directors and officers as a group and (e) by holders of
Series C Preferred Stock.
<PAGE>
Number of Common Shares Beneficially Owned (1)(2)(3)
------------------------------------------
<TABLE>
<CAPTION>
Assuming Conversion of All
Without Reference to Debentures and Series C
the Series C Preferred Stock, and Exercise
Preferred Stock of all Warrants and Options
---------------------- -----------------------------
Name Address Shares % Shares %
- ---- ------- ------ --- ------ ---
<S> <C> <C> <C> <C>
Stanley Becker, 55 East End Ave., #7, New York, NY (4) 2,164,166 14.07 2,164,166 14.07
Peter C. Yeung, 9 Rocky Glen, Irvine, CA 92641 (5, 6) 1,362,975 8.86 1,362,975 8.86
Max Goldring Trust, c/o Paul Garrett (7) 1,334,000 8.67 1,334,000 8.67
Tzium-Shou Lee (8) 981,917 6.38 981,917 6.38
Samuel E. Benjamin, MD (9) 898,333 5.84 898,333 5.84
Linda Jacobsen Franklin (10) 829,166 5.39 829,166 5.39
Union Bank, 18300 Von Karman, Irvine, CA 92713 (11) 658,750 4.46 658,750 4.46
John A. Karsten (12, 13) 504,114 3.25 504,114 3.25
Robert B. Lyons (12, 14) 135,000 * 135,000 *
Richard A. Sullivan (12, 15) 165,600 * 165,600 *
Joseph Caligiuri (16) 45,000 * 45,000 *
Susan L. Preston (16) 30,000 * 30,000 *
Jacob Y. Terner (16) 37,500 * 37,500 *
All Directors and Officers as a group (7 persons) (17) 921,514 5.93 921,514 5.93
</TABLE>
<TABLE>
<CAPTION>
Number of Shares Beneficially Owned by Series C Convertible Preferred Holders (1)(2)(3)
-----------------------------------------------------------------------------
Series C Convertible Assuming Conversion
Name Address Preferred Shares % to Common Shares %
- ---- ------- ----------------- --- ----------------- ---
<S> <C> <C> <C> <C> <C>
Walter Levison Bare Hill Associates Pension Plan 518.4 33.3 752 *
One Cranberry Hill, Lexington, MA 02173
Kevin Landry TA Associates Partners Profit Sharing 518.4 33.3 752 *
Trust
45 Milk Street, Boston, MA 02109
Roe Stamps, IV Summit Partners as Trustee of IRA Account 259.2 16.7 376 *
One Beacon Street, Boston, MA 02108
Stephen Woodsum TA Associates Partners Profit Sharing 115.5 10.0 167 *
Trust
45 Milk Street, Boston, MA 02109
William Schwenk 200 Downer Avenue, Hingham, MA 02043 103.7 6.7 150 *
<FN>
* Less than one percent.
(1) Unless otherwise specified, and subject to applicable community property
laws, the persons named in the table have sole voting and investment power
with respect to the Common Stock which they beneficially own.
(2) Holders of the Series C Preferred Stock are deemed to own beneficially the
Common Stock into which the Series C Preferred Stock is convertible. The
"Assuming Conversion of the Series C Preferred Stock" column assumes that
all holders of the Series C Preferred Stock have converted their Series C
Preferred Stock into shares of Common Stock.
(3) The Holders of Series C Convertible Preferred Stock are entitled to vote
with the holders of the outstanding shares of Common Stock, and not as a
separate class, except upon such matters with respect to which they are
specifically granted the right to vote as a class by the California
General Corporation Law. Holders of Series C Convertible Preferred Stock
are entitled to vote on an as-converted basis. At the record date the
conversion ratio was 1.45. The holders of Series C Preferred Stock are
provided 1.45 votes for each share of Series C Preferred Stock owned.
<PAGE>
(4) Includes warrants and A warrants that are exercisable. Mr. Becker's add-
ress is 55 East End Avenue, Apt. 7A, New York, New York 10028.
(5) Includes 1,329,000 shares of Common Stock, owned of record by Mr. Yeung,
also includes 31,975 1993 Debentures Shares and 2,000 1993 Debentures
Warrants Shares.
(6) At June 30, 1995, Convertible Subordinated Debentures sold in 1993 are
convertible into shares of Common Stock (the "1993 Debentures Shares").
Warrants issued concurrently with the Debentures are exercisable into
shares of Common Stock (the "1993 Debentures Warrants Shares").
(7) Includes the A Warrants, which are exercisable. Max Goldring Trust's add-
ress is c/o Paul Garrett, Trustee, 11920 Currituck Drive, Los Angeles,
California, 90049.
(8) Includes the A Warrants, which are exercisable. Mr. Lee's address is
924 Maple Road, Flessmoor, Illinois, 60422.
(9) Dr. Benjamin's address is 2763 Roscomare Road, Los Angeles, California,
90077.
(10) Includes the A Warrants, which are exercisable. Ms. Franklin Jacobsen's
address is 201 E 17 Street, New York, New York, 10003.
(11) All the shares of Common Stock owned by Union Bank have been deposited
into a Voting Trust in accordance with the Company's Wespercorp Voting
Trust Agreement (the "Voting Trust"). The Trust Agreement provides for
three trustees, who shall be officers or directors of the Company. As of
January 5, 1996, the Trustees are John A. Karsten, Robert B. Lyons and
Richard A. Sullivan. The trustees of the Voting Trust have full power to
vote all shares subject to the Voting Trust in their discretion, except
that the trustees will vote at the direction of Union Bank in connection
with any proposed: (i) sale of all or substantially all of the assets of
the Company, (ii) any amendment to the Articles of Incorporation, or (iii)
a merger of the Company in which the Company will not be the surviving
entity.
(12) Does not include shares subject to the Voting Trust as described in item
(11).
(13) Includes 451,614 shares of Common Stock, owned of record by Mr. Karsten;
also includes options to purchase 45,000 shares of Common Stock, which
options were vested pursuant to the July 1, 1994 and July 1, 1995 grants
each of 30,000 Directors Options to Mr. Karsten.
(14) Reflects those options to purchase such number of shares shown, which
options were granted pursuant to the ISO Plan. Also includes options to
purchase 105,000 shares of Common Stock, which options were vested
pursuant to the April, 1994 and April, 1995 grants each of 60,000
Chairman's Options.
(15) Reflects those options to purchase such number of shares shown, which
options were granted pursuant to the ISO Plan.
(16) Reflects those options to purchase shares of Common Stock, which options
were vested pursuant to the 1994 and 1995 grants each of 30,000 Director's
Options.
(17) Includes all shares of Common Stock and options referenced in footnotes
13, 14, 15, and 16, above, and includes an option granted to an executive
officer of the Company, who is not a director, which options are
exercisable within 60 days of the date of this Proxy Statement for 9,000
shares of Common Stock. The address of the foregoing persons is c/o the
Company at 7390 Lincoln Way, Garden Grove, California, 92641.
</FN>
</TABLE>
ELECTION OF DIRECTORS
A Board of five Directors is to be elected at the Annual Meeting, to
hold office until the next Annual Shareholders Meeting. The Board of Directors
of the Company proposes the five nominees named below. The accompanying Proxy
may only be voted in order of preference and with such cumulation, if
appropriate, as the persons appointed as proxies in the accompanying Proxy may
in their discretion determine. All nominees have advised the Company that they
are able and willing to serve as Directors; however, if any nominee refuses or
is unable to serve, the persons appointed as proxies in the accompanying Proxy
will vote for another person nominated by the Board of Directors. UNLESS
OTHERWISE DIRECTED IN THE ACCOMPANYING PROXY, THE PERSONS APPOINTED AS PROXIES
THEREIN WILL VOTE FOR THE ELECTION OF THE FIVE DIRECTORS LISTED BELOW.
<PAGE>
The following information, which is as of January 5, 1996, has been
furnished to the Company by the nominees:
Name Age Elected Director Since
- ---- --- ----------------------
John A. Karsten 63 1975
Robert B. Lyons 58 1988
Susan L. Preston 41 1994
Richard A. Sullivan 54 1994
Thomas J. White 36 -
All directors serve from their date of election until the next Annual
Shareholders Meeting. Executive officers are appointed by the Board of
Directors. Directors other than executive officers receive no cash compensation
for their services as directors, although the Company's By-Laws permit such
payment. No current director or executive officer has any arrangement or
understanding whereby he or she has been or will be selected as a director.
Further, no nominee for director is related to any other director or executive
officer.
Robert B. Lyons has been a Director of the Company since January, 1989, and has
been the Chairman of the Board since April, 1994. From 1984 through the present,
Mr. Lyons has served in various capacities at the Aerospace and Defense Sector
of GenCorp. Prior to that, Mr. Lyons spent 18 years in various technical and
management positions with Ford Aerospace and Communications Company, now Loral
Aerospace. He served on the Board of Directors of Western Empire Savings and
Loan from 1981 to 1988. Mr. Lyons has previously served on the City Council of
Placentia, California, as a Councilman, Mayor and Treasurer, on the Placentia
Planning Commission and on the Placentia Library District Board of Trustees.
Richard A. Sullivan was appointed as a Director and as President and Chief
Executive Officer of the Company in April, 1994. He held the position of
Executive Vice President and General Manager of the Company's subsidiary since
April, 1993, and was Vice President Sales and Marketing for MicroProbe
Corporation ("MicroProbe"), and for Source Scientific Systems, Inc. from May,
1989, until the Company acquired the Source Subsidiary in January, 1994.
Previously, he was President of LAB 2000 in Florida, a company specialized in
import and export of clinical and industrial products worldwide. From 1980 to
1988 he held various positions in Baker Instruments Company of Pennsylvania,
including Director of International Sales and Vice President of Sales and
Marketing. Mr. Sullivan holds a B.S. in Medical Technology from the University
of Buffalo, New York, and an MBA in marketing from Pace University.
John A. Karsten has been a director of the Company since he co-founded it in
1975. He was Secretary from November, 1990, to August 30, 1994. From November,
1990, to June, 1994, he served as the Company's Vice President and Chief
Financial Officer. From 1984 through 1989, he served as President and Chief
Executive Officer of Hughes Electrical Management System, Inc., City of
Industry, California, a privately held firm engaged in the design, marketing and
installation of electrical energy management systems.
Susan L. Preston has been a director of the Company since May, 1994. She is
employed by the Company as Director of Legal Affairs. From 1992 to 1994, she was
Vice President and General Counsel for MicroProbe. From 1991 to 1992, she
provided legal and technical background to EMCON Northwest, a national
environmental consulting firm involved in hydrogeology, remediation and
analytical services. She represented and managed Univar Corporation's
involvement on various Superfund site committees from 1990 to 1991 and was
environmental counsel for Weyerhauser Company from 1986 to 1990.
<PAGE>
Thomas J. White is the CEO and a director of VLSystems, Inc. in Irvine,
California, a systems integration and software development company specializing
in computer assisted design (CAD) systems. Under his direction, VLSystems
achieved a $1.2 million net worth turnaround in 3 years. From 1988 to 1990, he
was Vice President of Finance and Operations for Marketing Publications, Inc.
and from 1986 to 1988, he managed operations, tax and financial analysis for
Foxley and Company in Denver, Colorado. As a CPA, he has held Senior Tax
Specialist positions with Coopers & Lybrand in Denver, from 1984 to 1985, and
with Peat Marwick in Decatur, Illinois, from 1981 to 1984. Mr. White has been a
certified public accountant since 1981, and holds a B.S. in Accounting from
Illinois State University.
Executive Compensation
The following table sets forth information regarding compensation paid
by the Company to its Chief Executive Officer (the "Named Officer") during each
of the Company's last three fiscal years. No other executive officer of the
Company received salary and bonus payments in excess of $100,000 during the
fiscal year ended June 30, 1995, except for those who terminated their
relationships with the Company.
<TABLE>
<CAPTION>
Long Term Compensation
Awards (2)
------------
Name and Principal Position (1) Annual Compensation Securities Underlying
- ------------------------------- -------------------
Year Salary ($) Options (#)
---- ---------- ------------
<S> <C> <C> <C>
Richard A. Sullivan 1995 109,600
President and Chief Executive Officer 1994 103,021 200,000
Bruce Lynch 1994 47,687 0
(Resigned as President and Chief
Executive Officer on April 28, 1995)
Peter C. Yeung 1994 49,228 0
(Resigned as President and Chief 1993 73,843 4,000
Executive Officer on January 5, 1994)
<FN>
(1) During the fiscal year ended June 30, 1994, three persons consecutively
held the position of President and Chief Executive Officer. Mr. Sullivan
became President and Chief Executive Officer on May 1, 1994. Bruce W. Lynch
served as President and Chief Executive Office from January 5, 1994, to
April 30, 1994, and received $47,687 in salary. Peter C. Yeung served as
President and Chief Executive Officer until January 5, 1994, and, during
the fiscal year, received $49,228.20 in salary. Mr. Yeung received
additional compensation under the provisions of a severance agreement.
(2) The Company has no stock appreciation rights plan. The Company has an
incentive stock option plan.
</FN>
</TABLE>
<PAGE>
Options Exercises and Year-End Value Table
- ------------------------------------------
The table below sets forth information regarding (i) the exercise of
stock options by the Named Officer during the fiscal year ended June 30, 1995,
and up to and including the first quarterly period ended September 30, 1995, and
through January 5, 1996; (ii) the number of unexercised options held by the
Named Officer as of January 6, 1996, and (iii) the value as of January 6, 1996,
of unexercised in-the-money options held by the Named Officer.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Shares Acquired Value at 01/05/96 (#) at 01/05/96 ($)
Name on Exercise (#) Realized ($) Exerciseable/Unexerciseable Exerciseable/Unexerciseable (1)
---- --------------- ----------- --------------------------- ------------------------------
<S> <C> <C> <C> <C>
Richard A. Sullivan -0- -0- 150,000/50,000 19,500/6,500
<FN>
(1) Value per share is based on the difference between the option exercise
price per share and current market price per share of Common Stock ($0.63
per share) as of January 5, 1996.
NOTE: No SAR's were granted during Fiscal Year 95. All options granted to Mr.
Sullivan were granted at their fair market value.
</FN>
</TABLE>
<TABLE>
Option Grants in Fiscal Year 94 (1)
<CAPTION>
% of Total Options
Options Granted to Employees to Exercise or Base
Name Granted (#) Employees in Fiscal Year Price ($/Share) Expiration Date
- ---- ----------- ------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Richard A. Sullivan 200,000 100.0 $0.50 12/31/99
<FN>
(1) There were no option grants in Fiscal Year 1995.
</FN>
</TABLE>
Directors' Fees and Employment Contracts
- ----------------------------------------
During the fiscal year 1995, the Company did not pay a directors' fee
to any directors on the Board. The following table sets forth information
regarding directors or officers who had consulting and related agreements with
the Company during Fiscal Year 1995.
<TABLE>
<CAPTION>
Dates of Agreement/
Name of Director Working Relationship Compensation Scope of Services Provided
- ---------------- -------------------- -------------- ---------------------------
<S> <C> <C> <C>
John A. Karsten July 1, 1994 to $5,833.33 Accounting and Financial preparation of
October 31, 1994 per month fiscal year end documentation (part time)
Susan L. Preston February 1, 1994 $80.00 per hour General Counsel, contract and patent matters
to December 31, 1994
Susan L. Preston January 1, 1995 $4,100 Part-time employment as Director
to present of Legal Affairs
Robert B. Lyons May 15, 1994 $100.00 per Marketing support, mergers, divestitures,
hour acquisitions and special projects
</TABLE>
The Company has employment agreements with Susan Preston, a director; Richard A.
Sullivan, an offricer and director; and with Mokhtar A. Shawky and Catherine
Curtis, who are officers of the Company.
<PAGE>
OTHER MATTERS
The Board of Directors is not aware of any business which may be
properly presented for action at the Annual Meeting and which is required to be
disclosed in this Proxy Statement except the matters set forth in the Notice and
described in this Proxy Statement. Unless otherwise directed, all shares
represented by the persons named in the accompanying Proxy will be voted in
favor of the proposals described in this Proxy Statement. If any other matters
come before the Annual Meeting, including matters incident to the conduct of the
meeting and any Shareholder proposal omitted from the Proxy Statement and Proxy
pursuant to the Proxy rules of the Securities and Exchange Commission, the
persons named in the accompanying Proxy will vote on those matters according to
their best judgment.
EXPENSES
The entire cost of preparing, assembling, printing and mailing this
Proxy Statement and the enclosed form of Proxy and the cost of soliciting
Proxies with respect to the Annual Meeting will be borne by the Company. The
Company will request banks and brokers to solicit their customers who
beneficially own shares listed of record in names of nominees, and will
reimburse those banks and brokers for their reasonable out-of-pocket expenses of
such solicitations. The original solicitation of Proxies by mail may be
supplemented by telephone, telegram and personal solicitation by officers and
other regular employees of the Company, but no additional compensation will be
paid to such individuals.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders which includes financial
statements for the fiscal years ended June 30, 1994 and 1995, is being sent to
the Shareholders concurrently with mailing of this Proxy Statement. The Annual
Report is not to be considered as part of the soliciting material.
SHAREHOLDERS' PROPOSALS
It is presently anticipated that the 1995 Annual Meeting of
Shareholders will be held on Wednesday, February 21, 1996. Shareholders desiring
to exercise their rights under the proxy rules of the Securities and Exchange
Commission to submit proposals for consideration by the Shareholders at the 1996
Annual Meeting are advised that their proposals must be received by the Company
no later than August 1, 1996 in order to be eligible for inclusion in the
Company's Proxy Statement and form of Proxy relating to that meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Garden Grove, California Catherine Curtis
January 5, 1996 Secretary
Copies of the Company's Annual Report on Form 10-KSB filed with the Securities
and Exchange Commission, including financial statements, can be obtained without
charge by holders (including beneficial owners) of the Company's Common Stock
and Series C Preferred Stock, from Catherine Curtis, Corporate Secretary, 7390
Lincoln Way, Garden Grove, California 92641.
